Peru to Meet U.S. Leaders on Plan to Limit Debt Payments
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WASHINGTON — Peruvian officials, having decided to limit payments on their country’s $13.7-billion foreign debt, are meeting with world financial leaders, including members of the Reagan Administration, to discuss their action.
Peruvian Prime Minister Luis Alva Castro was to see Secretary of State George P. Shultz and other high-ranking U.S. officials today about limiting Peru’s debt payments--a policy that has many bankers and governments worried because of its worldwide implications. Peru owes $1.9 billion to U.S. banks.
The idea of holding payments on foreign debt to a fixed proportion of a country’s foreign income--10% in Peru’s case--has won support in many debtor countries.
The 10% rule means that Peru’s creditors will get only about $300 million a year, much less than the interest due to the banks and governments that have lent the money.
The World Bank estimates that foreign debt in the Third World is now close to a trillion dollars. If Peru’s measure proved contagious, it would heavily damage the whole world financial system.
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